Custodia, Vantage Bank Launch Tokenized Deposit Consortium Under GENIUS Act

Executive Summary

Custodia Bank and Vantage Bank have formally launched a consortium designed to enable U.S. community and regional banks to issue and manage tokenized deposits and integrate stablecoins within their existing banking frameworks. This initiative, unveiled on October 23, 2025, positions itself under the newly established regulatory clarity of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, utilizing Custodia's proprietary GENIUS-compliant stablecoin, Avit, for interbank settlements. The collaboration aims to bridge the gap between traditional banking and the burgeoning digital asset economy, fostering institutional adoption while maintaining rigorous regulatory oversight.

The Event in Detail

The consortium’s platform, announced on October 23, 2025, integrates tokenized deposits and stablecoins to provide secure and interoperable access to digital assets for community and regional banks. This system is facilitated through Custodia’s bank-grade blockchain platform and Infinant’s Interlace platform. Vantage Bank and Custodia are actively inviting other financial institutions to join this consortium, which offers a turnkey solution for embedding tokenized deposits and stablecoins directly into traditional online banking environments. The framework is patent-protected, drawing on Custodia's patent portfolio developed since 2020 for tokenizing U.S. dollars on blockchains.

A key aspect of this system is its ability to unify stablecoins and bank deposits, with Avit, Custodia's GENIUS-compliant stablecoin, facilitating the settlement of shifting tokenized deposit balances between banks. The consortium is officially recognized as a "permitted payment stablecoin issuer" under the GENIUS Act, which was signed into law on July 18, 2025. This designation provides members with the capacity to adopt tokenized payment solutions while ensuring full regulatory compliance. The GENIUS Act mandates that permitted payment stablecoin issuers maintain 1:1 reserves backed by specific assets such as U.S. dollars, Federal Reserve notes, funds at regulated depositories, and certain short-term Treasuries, explicitly prohibiting rehypothecation except for liquidity purposes. Unlike some larger banks' closed digital asset initiatives, the Custodia and Vantage model emphasizes open participation, allowing any community or regional bank to join and transact securely. Pilot programs have already demonstrated practical applications, including instant interbank deposit balance transfers and cross-border payments, reflecting over two years of preparation since Custodia and Vantage Bank first issued tokenized bank deposits in March 2025.

Market Implications

This consortium represents a significant development for the U.S. banking sector's engagement with digital assets. By blending the efficiency of blockchain technology with the stability and regulatory safeguards of insured banking, tokenized deposits offer a path for innovation without compromising systemic protections. Tokenized deposits inherit prudential advantages such as FDIC insurance, established supervisory regimes, capital and liquidity requirements, and orderly resolution procedures, distinguishing them from privately issued stablecoins. This approach enables banks to offer blockchain-based payment capabilities while preserving core deposits from disintermediation risk, a critical concern for community banks.

The initiative also aligns with the broader growth trajectory of the stablecoin market. Treasury Secretary Scott Bessent has projected the U.S. stablecoin market could expand from $250 billion to over $2 trillion within the next three years. This platform provides community banks with a mechanism to participate in this expansion, offering innovative digital payment capabilities that leverage their existing infrastructure. While stablecoin operations present higher regulatory complexity and operational risks, they also offer greater revenue opportunities and competitive positioning. Tokenized deposits, conversely, operate within existing banking regulatory frameworks, reducing implementation complexity and operational risk, albeit with potentially more limited competitive differentiation compared to broader digital asset market participation. The open participation model allows member banks to maintain control of their wallets while achieving interoperability, offering a scalable solution for integrating digital assets into diverse banking operations.

Expert Commentary

Industry observers note that "tokenized bank deposits may prove the real innovation, blending crypto efficiency with the stability of insured banking." This perspective highlights the inherent advantage of tokenized deposits operating within the traditional banking framework, where each tokenized deposit represents a claim on an insured deposit at a regulated bank. "The question isn't whether tokenized money wins - it's whether banks participate or get bypassed entirely," reflecting the strategic imperative for financial institutions to engage with onchain finance. The GENIUS Act is broadly seen as legitimizing stablecoins and creating "a land grab opportunity for the future of digital money," according to analyses. This regulatory clarity is crucial for fostering confidence and accelerating institutional involvement in digital asset ecosystems. Tokenized deposits, with their strong regulatory pedigree, are positioned to offer a durable foundation for digital payments innovation, ensuring liquidity through access to the Federal Reserve's discount window—an assurance currently unmatched by stablecoin issuers.

Broader Context

The launch of this consortium occurs against a backdrop of increasing regulatory focus on digital assets in the United States. The GENIUS Act, enacted on July 18, 2025, marks the first comprehensive federal legislation on digital assets since a presidential executive order aimed at establishing the U.S. as a global "crypto capital." This legislative development provides the necessary framework for "permitted payment stablecoin issuers" and clarifies that such stablecoins are neither securities under U.S. federal securities laws nor commodities under the Commodity Exchange Act. The Act also outlines a role for state-level regulation for smaller issuers, provided state regimes are "substantially similar" to the federal framework. This regulatory environment is creating a dynamic where banks are strategically evaluating how to participate in the evolving digital money landscape. The Custodia and Vantage initiative exemplifies a measured approach for traditional institutions to enter the digital asset space, leveraging existing trust and regulatory compliance to facilitate the "onchain" future of finance. The co-existence and symbiotic relationship between tokenized deposits and stablecoins are anticipated to create a "flywheel" effect for onchain finance, addressing diverse problems for various participants.